Former NSW RSL president Don Rowe withdrew more than $200,000 in cash on his RSL credit card and provided free phones to five family members, an explosive auditor's interim report has found.

The report, which deepens the scandal that has engulfed the veterans' group since Fairfax Media first raised expenses concerns in September, reveals Mr Rowe was quietly forced to resign over his spending rather than health reasons as claimed.

The forensic review by auditors KordaMentha also blasts national president Rod White for refusing to explain his share in more than $2.5 million in consultancy fees that he received from the organisation's aged care arm, RSL LifeCare.

And it found that Mr Rowe and Mr White had both used their positions within the RSL to steer donations from other, needier parts of the organisation towards RSL LifeCare while they were receiving consultancy fees. Both have breached charities laws by failing to tell the state charities minister about the payments, which they received despite being volunteers, it states.

NSW Veterans Affairs Minister David Elliott said the interim report "raises significant questions, which need to be answered" but added he would wait for the final report.

Acting national president Robert Dick, who has replaced Mr White while he is investigated, acknowledged the league was facing a "very serious issue".

"Disciplinary action will be taken should the people those allegations are against be proven guilty. We will not tolerate this behaviour in the RSL," he said.

KordaMentha found that from January 2009 to December 2014, Mr Rowe put about $475,000 on his corporate credit card. This included $213,000 in cash withdrawals. He was approved by the NSW council to spend $20,000 a year on car expenses but the investigators said it was unclear why he had covered these with cash, or what the other $93,000 was for.

RSL national president Rod White has stood aside.Credit:Jeff de Pasquale

He also paid $38,000 in phone bills that covered phones for five family members as well as his own.

Mr White, who was then NSW honorary treasurer, was warned by chief financial officer Annette Mulliner that there were concerns about the phone account.

"Mr White apparently examined certain aspects of the claims and according to a briefing note prepared by Miss Mulliner, based upon this examination, approached Mr Rowe and demanded he resign as RSL NSW state president or he would initiate a forensic audit of Mr Rowe's expenses," the report states. "Mr Rowe subsequently resigned on 25 November 2014."

In a statement issued the following day Mr Rowe said: "After recent health problems and a spell in hospital, my doctors have told me I need to take greater care of myself and the demands of being RSL state president should take a back seat."

Mr White went on to become state president in 2015 and then national president. He stood down last month amid the inquiry into the RSL LifeCare payments.

The KordaMentha report - which has been sent to the Australian Charities and Not-for-profits Commission - says that as treasurer, Mr White should have been authorising Mr Rowe's expenses but "we have not found any evidence to show that he was authorising the expenditure".

It said further investigation was needed into Mr Rowe's "potential culpability" and Mr White's failure to inform the rest of the RSL NSW council before he demanded Mr Rowe's resignation.

When contacted, Mr Rowe said he had not read the report and asked Fairfax Media to forward him a copy. He did not subsequently respond to messages. Mr White could not be reached.

The report confirms that the consultancy fees paid out by RSL LifeCare - first revealed by Fairfax Media in September - went back to 2007 and totalled more than $2.5 million – far more than originally thought.

It says it asked Mr White to "provide details of the nature and extent of the consultancy services he provided together with supporting documentation" and to meet with the auditors to discuss the payments. He refused both - a response the investigators described as "extraordinarily unusual".

RSL LifeCare "declined to provide KordaMentha with documents concerning the payments", saying they were part of a private agreement.

Mr White and Mr Rowe were among several NSW state councillors who were also directors of RSL LifeCare and received the consultancy fees over many years despite their roles with both organisations being voluntary.

During this time they used their positions within the NSW state council to change the rules so RSL LifeCare was designated a needy veterans charity despite it being a $1 billion-plus enterprise with strong finances.

They also directed sub-branches and women's auxiliaries to donate to the Welfare and Benevolent Institution, the trust that runs RSL DefenceCare, which helps serving military members and veterans and their families in times of crisis. The WBI - of which Mr White and Mr Rowe were both trustees - swiftly forwarded this money as "grants" to RSL LifeCare.

There was a "lack of documentation" about these payments and the general manager of DefenceCare, Robyn Collins, told the auditors she had "little involvement" in donations by the WBI and "no oversight" of its daily finances.

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RSL NSW has since shut down this funneling of money, which a senior executive told KordaMentha had turned WBI into a "clearing house".

The report recommends a separate forensic investigation into how donations were influenced towards RSL LifeCare. It also called for further investigation of Mr Rowe's expenses.